• Suresh Kabra

    Startups!! Do You Know Your Customers Well?

    A business exists only till the time it has paying customers. The day your customers cease to exist, or have no reason to pay you for your products or services, your business is in deep trouble. So, if we consider all the stake holders in a corporate, an i.e. employee, executive management, investors and customers, the customer is the most important. Now the chances are that you know all other stake holders reasonably well due to daily interactions in the office or board meetings. The question is that do you know your customer well? If not, what can you do to know them well?

    Especially important for a startup to know, as his starting up, sustainability and scaling up are directly dependant on the customer !

    There are several stages of knowing one’s customer. What business they are in and which industry they belong to are the easier ones. The more challenging aspects are:

    • Who are your customer’s competitors in the industry? What are the competitor’s differentiators vis-a-vis what your customer is offering?
    • What is their vision of the industry that they are a part of? Where do they think the industry will be in 2 years and 5 years from now?
    • What is preventing your customer to secure a larger market share in their industry?
    • Who is your customer selling to, i.e. your customer’s customer. (By the way, this is the end customer from your perspective). What is his ask? In which industry is he sitting and how’s that evolving?
    • How is your customer’s roadmap evolving with respect to the developments in the end customer’s industry? Are the two aligned or are they diverging? If they are aligned, you are in good shape but if they are diverging, you may go out of business because your customer will go out of business.

    To summarize, knowing your customer is a three-tier process: I) knowing the immediate (paying) customer, II) knowing your customer’s industry and its trends and III) knowing the end customer’s (your customer’s customer) industry and how it is evolving?

    The problem is that in most of the organizations sales owns the customer and acts as a heavy-handed gatekeeper for any and all customer interactions. Since sales is transactional by its very nature, knowing the customer stops at the very first step of knowing who is making the purchase decision, who will issue the purchase order and release payment. Mostly knowing the customer stops here! Unfortunately, none of these guys can give you long term visibility into the customer’s business which is so essential for long term sustainability of your own organization.

    What you need is a three-tier customer relationship, each focusing on one aspect of knowing the customer.

    Starts with sales at step (I) where a relationship is built around a transaction and customer organization is mapped.

    Then your product manager (for products) or domain expert (for services) has to focus on step (II), i.e. reach-out to its peer at customer’s end and engage him on a product and industry-centric discussion.

    The common pitfall here is that product managers tend to get far more engineering (inside) focused in delivery. Their external interaction is mostly limited conferences and exhibitions to collect generic inputs about the industry. They really don’t spend enough face time with their customers directly to get to know customer’s industry, competitors and the customers’ customer industry. Most of the time they depend upon sales to provide the inputs against questions (a)-(c) above, but that’s a wrong expectation. It will never happen.

    Now coming to step (III), i.e. knowing your customers’ customer industry. This is where a free exchange of ideas at the executive level starts to matter. The CTO/CEO of your company has to engage his peers at the customer’s end (could be CTO/CEO or BU head) and understand the industry trends. Your executive management needs to collect this information from threads picked across all of their key customers and then make a sound call on how they expect the very end customer (customers’ customer) to evolve. It has to be more than a gut feeling or some internet-based research. Their assessment has to be based on hard data collected from discussions done with your customers.

    Once you have a sense of changes in end customer’s industry, address the question (e) above, i.e. is your customer helping to shape the industry or is he trying hard to catch-up? Once you know which customer is sitting in which bucket, you know what to do for your own long term growth and survivability.

    Unfortunately, what happens in CXO-CXO meetings is that it gets limited to resolution of tactical issues which couldn’t be resolved at lower levels like price, contract legality, delivery issues etc. It rarely goes outside of this sphere, of never-ending business issues and any discussion to get a deep understanding of their future gets sidelined. In turn, your future gets compromised as it is directly dependent on your customer’s future!

    Everything starts with the customer – June Martin

    Gues post by Suresh Kabra – Founder, PriceMap

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    Jul, 07
    2015
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